Taxpayers to foot bill for Freda Mine cleanup

Red Arrow Gold Corporation’s former site requires remediation

Mine waste piles at the Freda Mine pose a risk to water quality and erosion, prompting the Colorado Division of Mining, Reclamation and Safety to come in to clean up the site.

Courtesy of Colorado Division of Mining, Reclamation and Safety

Red Arrow Gold Corp. failed to post an additional bond for reclamation costs for the Freda Mine, northwest of Silverton. Company owner Craig Liukko claims a parent company and investors failed to come through on financial obligations.

Courtesy of Colorado Division of Mining, Reclamation and Safety

The Colorado Division of Mining, Reclamation and Safety will likely begin a project next summer to cleanup the Freda Mine, which its former permittee abandoned without the funds to clean it.

Courtesy of Colorado Division of Mining, Reclamation and Safety

Taxpayers again must foot the bill for cleaning up a Colorado mine site previously operated by embroiled company Red Arrow Gold Corp.

“We wrote a violation, and recalculated his (Red Arrow owner Craig Liukko) bond,” said Tony Waldron of Colorado’s Division of Mining, Reclamation and Safety. “He didn’t respond. Sometimes people just disappear.”

Trouble began in 2013 when state inspectors visited a relatively minor but active mine site on which Red Arrow held a permit about seven miles northwest of Silverton, called the Freda Mine.

Finding a litany of violations that posed a risk of water pollution and erosion, DMRS determined Liukko’s bond of $8,685 would not cover the cost of cleanup, estimating instead it would take $19,000.

But when Liukko did not post the additional bond and failed to attend several state meetings about his company, Colorado’s Mined Land Reclamation Board in 2014 revoked his license and seized the $8,685 bond.

The $10,315 difference will now be covered by a fund set up for these types of situations, Waldron said. Part will be come from federal money, and another portion will be covered by a severance tax on Colorado’s gross income taken from oil and gas and carbon dioxide production, which contributes about $130,000 a year to the state’s mine cleanup efforts.

Kirstin Brown, a reclamation specialist with DMRS, said work at the Freda Mine is likely to begin in summer 2017.

She said crews, among other tasks, will need to haul off trash from a recently erected mill building, close two mine portals, and take on a large project to re-grade mine waste piles that are eroding into Ruby Creek, a tributary of Mineral Creek.

Brown also found during a 2015 inspection a mine waste pile outside the permit boundary on adjacent Forest Service land.

“And oddly, it’s uphill of the site, which is very strange, and not the way (miners) normally work,” she said.

Brown estimated the project would take a couple weeks to complete once crews can gain access to the hard-to-get-to site near Ophir Pass, at an elevation of 11,200 feet.

The approximately 1-acre site is relatively small when compared with other polluters in the heavily mined Animas River watershed, and is not included in the Environmental Protection Agency’s recently declared Superfund listing, which will address 48 mining sites around Silverton.

Yet Brown said the small mine waste piles and trash that is a potential hazard to waterways is just enough to be “irritating,” warranting a cleanup.

Aside from the Freda Mine, DMRS’s Waldron said the state is paying for a cleanup project at Liukko’s other former mining operation in Mancos, where investigators in 2013 say they found dangerous levels of mercury and arsenic contamination.

Waldron said DMRS completed one season of work over the summer, yet there are lingering tasks to do in summer 2017 before the site is fully remediated.

So far, the state has spent $113,034 on cleaning the site in Mancos, with only $8,875 of Red Arrow’s initial bond covering the cost, according to DMRS spokesman Todd Hartman.

Liukko, who lives in Arizona, also has not paid any of the $339,667 in violations issued by the state, Hartman said, adding that the amounts due have been sent to the state’s collection office.

When contacted last week, Liukko said he was unable to comment because of pending litigation.

His company is involved in a bankruptcy case in Colorado, wherein Liukko claims Red Arrow’s parent company American Patriot Gold and investors Maximilion Investors seized Red Arrow’s assets with the intent of taking over the mine in Mancos.

Liukko argued the $25 million loan the investors promised was not delivered, and the continual breach of funding obligations led to the mine’s closure and Red Arrow’s inability to pay for the cost of cleanup.

“The agenda of Maximilian and APG became very clear after more than two years of false assurances and delays that began in 2010; to own the Red Arrow Mine via concocted defaults and eventual foreclosure, after a large quantity of mineral potential was established,” Red Arrow said in court filings associated with the bankruptcy.

Maximilian Investors did not return requests for comment, and representatives with American Patriot Gold could not be reached. Both parties filed a motion to dismiss Red Arrow’s claims for relief.

Waldron said cases like Liukko are a “rarity” in the state. He said the state has about 1,600 mining sites permitted and about $528 million in financial warranties for mine sites and another $23 million for prospecting sites.

He said legal action against Liukko would cost “more in legal expenses than what we’d gain back,” so it’s not likely the state would press charges against him.

“We can’t watch every site every day all the time, but we do inspect with some frequency,” Waldron said. “And sometimes we do get stuck with (the) amount of bond we have.”

Related Story

Taxpayers to foot bill for Freda Mine cleanup

Mine waste piles at the Freda Mine pose a risk to water quality and erosion, prompting the Colorado Division of Mining, Reclamation and Safety to come in to clean up the site.

Courtesy of Colorado Division of Mining, Reclamation and Safety

Red Arrow Gold Corp. failed to post an additional bond for reclamation costs for the Freda Mine, northwest of Silverton. Company owner Craig Liukko claims a parent company and investors failed to come through on financial obligations.

Courtesy of Colorado Division of Mining, Reclamation and Safety

The Colorado Division of Mining, Reclamation and Safety will likely begin a project next summer to cleanup the Freda Mine, which its former permittee abandoned without the funds to clean it.

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